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[Suresh]

Bloomberg: Asia's Self-Inflicted Wounds May End the Fun

As economists buzz about a Japanese recession, officials in Tokyo are racing to assign blame.

An unfolding global slowdown is the most mentioned excuse. Fallout from the U.S. subprime debacle is a close second. Surging oil prices also are being held up as an ominous force imperiling Japanese prosperity.
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Japan Inc. Returns

Japan's woes will come as a disappointment to investors expecting big things from the longest post-war recovery.

While global growth gets most of the credit, the upgrades championed by Junichiro Koizumi, prime minister from 2001-2006, helped turn things around. As growth returned, though, reform fatigue set in and Koizumi's drive to get the government out of the economy and boost Japan's competitiveness lost momentum.

The one-year tenure of Koizumi's successor, Shinzo Abe, accelerated the return of Japan Inc. By the time Abe resigned amid scandals and general incompetence, the old practice of cross-shareholdings between companies and takeover defenses were back in vogue.

Many of the needed reforms have been sidelined, from boosting productivity and importing foreign labor to increasing entrepreneurship. The same is true of efforts to scrap Japan's dependence on near-zero interest rates, massive public borrowing and a weak currency. Current Prime Minister Yasuo Fukuda is too preoccupied with halting the drop in the ruling-Liberal Democratic Party's popularity to tend to the economy.

Few Options

A return to the crisis days of the late 1990s is unlikely. Japan's banking system is stable and companies have done considerable restructuring. Still, Japan has yet to defeat deflation at a time when options are limited.

``Unlike the three major business-cycle downturns that preceded this one, neither fiscal nor monetary policy are available to soften or shorten the decline,'' says Carl Weinberg, chief economist at High Frequency Economics Ltd. in Valhalla, New York.

Crude oil prices near $100 per barrel pose an additional challenge. ``The nature of the latest threat to the cycle is particularly problematic for the Bank of Japan, as it faces the risk of input cost-driven inflation, while real demand is under downward pressure,'' says Richard Jerram, chief Japan economist at Macquarie Securities Ltd. in Tokyo.

Leaky Roofs

Japan failed to use five years of decent growth to rein in a public debt the government says will reach 147 percent of gross domestic product by March 2009. BOJ Governor Toshihiko Fukui failed to normalize monetary policy. Japan's benchmark lending rate is 0.5 percent, by far the lowest among major economies.
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Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

Bloomberg: Goldman Says Japan Recession Risk at `Danger Level'

Goldman Sachs Group cut its economic growth estimate for Japan and said there's a 50 percent chance of a recession in the world's second-largest economy.
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[Tetsufumi Yamakawa, chief Japan economist at Goldman,] cut his 2008 growth estimate to 1 percent from 1.2 percent, citing slower demand from emerging markets.

Stocks including Mitsubishi Estate Co. declined today after the Credit Suisse report. Japan's leading index, a gauge of growth in the next three to six months, stalled in November, a report today showed.

``Goldman's report highlighting the increasing chances of a recession, as well as the leading index's poor showing, indicates the outlook for external and internal demand is nonexistent,'' said Hiroaki Osakabe, who helps oversee $365 million at Chiba-Gin Asset Management Co. in Tokyo.

Sluggish spending by consumers has left Japan more dependant on overseas markets, just as cooling U.S. demand threatens to spread to Asia, where Japan sells half its exports.

Slashing Interest Rates

Goldman yesterday said slower growth in the world's largest- economy may force the U.S. Federal Reserve to slash interest rates. It predicts the Fed to cut its benchmark rate to 2.5 percent by the third quarter....
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Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Dave]

Have you ever wondered what would happen if the global economy began to slow while the major world central banks expanded money supply at more than 10% a year? -Dave

Bloomberg: Japan's Inflation Rate Doubles to 0.8% as Oil Surges

Japan's inflation rate doubled in December to the fastest in more than nine years, as companies passed rising oil and commodity costs to consumers.

Core consumer prices, which exclude fresh food, climbed 0.8 percent from a year earlier, the statistics bureau said today in Tokyo. The median estimate of 44 economists surveyed by Bloomberg News was for a 0.6

``The global economy is slowing while prices of food and energy keep advancing,'' said Hiroshi Shiraishi, an economist at Lehman Brothers in Tokyo, who expects the central bank to keep interest rates on hold this year. ``That's the worst combination for the Japanese economy, which depends on exports and has stagnating domestic demand.''

``Rising daily goods prices are negative for consumer spending when wage growth has stalled,'' Economic and Fiscal Policy Minister Hiroko Ota told reporters today. ``We can't say Japan has made a major step'' toward the end of deflation.

Consumer confidence fell to a four-year low in December and wages only rose in two of the first 11 months of last year.

Milk, Beer

Crude oil rose to a record $100 a barrel this month. A UBS Bloomberg index of 26 commodities that tracks the prices of oil, industrial metals, agriculture and livestock climbed to a record on Jan. 14 after surging 22 percent last year.

Dairy farmers in Hokkaido, northern Japan, yesterday raised the price of milk by 3 percent because of higher costs of feed for cows. Kirin Holdings Co., Asahi Breweries Ltd. and Sapporo Holdings Ltd. plan to boost beer prices in the next three months to cover higher malt costs. Nisshin Foods Inc., Japan's biggest macaroni maker, will increase pasta prices as wheat costs soar.

Smaller companies remain unable to pass on costs out of concern that sales may decline, said Ryutaro Kono, chief economist at BNP Paribas in Tokyo.
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Dave

Please feel free to agree with or critique the article excerpts and our comments. Alan Greenspan: Gold and Economic Freedom

[Suresh]

Bloomberg: Japan's Wages Fall at the Fastest Pace in Three Years
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Monthly wages, including overtime pay and bonuses, dropped 1.9 percent from a year earlier, the Labor Ministry said in Tokyo today.
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Bank of Japan policy needs to be ``flexible'' should the world's second-largest economy stall, central bank policy maker Kiyohiko Nishimura said today. Slower domestic demand puts the economy's longest expansion in 60 years at risk as a global slowdown hurts exports, the main driver of growth.
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Reports in the past month have shown the economy is losing steam with job vacancies falling, housing starts sliding and export growth slowing. Gross domestic product probably slowed to an annual 0.9 percent rate in the fourth quarter from 1.5 percent in the previous three months, according to the median estimate of economists surveyed by Bloomberg News.
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Bonuses fell 3.6 percent, the biggest drag on paychecks last month, today's report showed. Most employees get a winter bonus in November or December that typically amounts to 10 percent of annual income.
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``Small and midsized companies can't afford to raise bonuses as their profits are being squeezed,'' Ando said. Bonuses at small businesses fell 3.4 percent last year, compared with a 0.1 percent increase at large companies, the government said.

Most small businesses said last quarter that saving profits was a higher priority than increasing wages, according to a Finance Ministry survey of 10,000 companies released last month.
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Related to the topic of reduction in wages, here is a Wall Street Journal article entitled "Tax-Happy Fukuda" that suggests rising tax rates are coming, at least for capital gains.

[Suresh]

Agence France-Presse: Japan's jobless rate rises as inflation hits decade high
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The jobless rate rose unexpectedly to 3.9 percent in February from 3.8 percent the previous month, official figures showed.

Although Japan should avoid a sharp rise in unemployment in the coming years thanks to the retirement of post-war baby boomers, the labour market could worsen in the near term because of a tougher business climate, analysts said.
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Core consumer prices, which exclude volatile fresh food, rose 1.0 percent in February from a year earlier, the quickest pace since March 1998.
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For years, the biggest headache for Japan's central bank was deflation, or falling consumer prices, which undermined company profits and gave consumers an incentive to wait to spend their money.

Now it has another worry -- soaring prices of oil, raw materials and food that are making life tougher for companies and consumers.
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Japanese household spending was flat in February as average incomes dipped 0.1 percent, the government said.
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According to a Bloomberg article, excluding energy as well as food, Japan's consumer prices fell 0.1 percent in February. According to RTT News," overall CPI rose 1.0%, driven at least in part by gas prices, which had risen 18.2% in February.
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Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

Government cash handouts to each resident (as opposed to consumer sentiment reflecting optimism for the future) may have caused the uptick in household spending in May 2009.

As an aside, a New York Times article entitled "Young Japanese Raise Their Voices Over Economy" noted that there is a generational disparity in terms of unemployment rates.

[Suresh]

Bloomberg: Japan Retail Sales Fall for 10th Month on Job Losses
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Sales slid 3 percent from a year earlier, the Trade Ministry said today in Tokyo.
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The retail slump indicates consumers, whose spending accounts for more than half of the economy, are unlikely to contribute to a recovery as employment prospects worsen.
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Sales at large retailers tumbled 6.7 percent from a year earlier, the report showed. Department-store sales fell 8.8 percent in June, capping the worst half-year performance on record, the Japan Department Stores Association said last week. Sales at convenience stores declined for the first time in 14 months in June, according to the Japan Franchise Association.
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Sales of general goods led last month’s declines, falling 6.6 percent from a year earlier, the ministry said. Car sales slipped 0.5 percent, clothing and fabrics dropped 5.7 percent and fuel declined 5.5 percent.
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The unemployment rate rose to a six- year high of 5.3 percent in June and job openings slumped to the scarcest on record, economists predict reports will show on July 31.
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Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

With retail sales falling and six million surplus workers, Japan's unemployment rate will likely approach double digits over the next several years.
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Bloomberg: Japan’s Jobless Rate at Six-Year High, Prices Drop
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The jobless rate advanced to 5.4 percent from 5.2 percent in May, the statistics bureau said today in Tokyo.... Consumer prices excluding fresh food, the central bank’s preferred gauge, fell a record 1.7 percent in June, a separate report showed.
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“Worsening job prospects will continue to weigh on Japan’s recovery,” said Yasuhiro Onakado, chief economist in Tokyo at Daiwa SB Investments Ltd. in Tokyo. “The export recovery is helping production but capacity utilization is still low and companies are still saddled with excess capacity and employment.”
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Given Japan’s current production levels, companies have 6 million extra workers, the highest ever, the Cabinet Office said last week. A report yesterday showed that while output increased 2.4 percent in June from the previous month, it fell 23.4 percent from a year ago.

Record Low

The number of positions available to each job applicant rose stood at 0.43, a record low, the Labor Ministry said. Economists regard the ratio as a leading indicator for the unemployment rate.
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Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Dave]

FT.com: Japan wages post record fall in June

Wages in Japan suffered their sharpest drop in nearly two decades in June, fuelling concerns that the economy would remain under pressure from depressed consumer spending.

Monthly wages, including overtime and bonuses dropped 7.1 per cent from a year earlier for the 13th decline in a row to Y430,620, according to the Labour Ministry.

Wages in Japan suffered their sharpest drop in nearly two decades in June, fuelling concerns that the economy would remain under pressure from depressed consumer spending.

Monthly wages, including overtime and bonuses dropped 7.1 per cent from a year earlier for the 13th decline in a row to Y430,620, according to the Labour Ministry.
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Dave

Please feel free to agree with or critique the article excerpts and our comments. Alan Greenspan: Gold and Economic Freedom

[Suresh]

MarketWatch: Japan reports record unemployment rate for July
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Japan's Ministry of Internal Affairs and Communications said the country's unemployment rate rose to 5.7% in July from 5.4% in the previous month.
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The number of unemployed people rose 40.2% from July of last year to 3.59 million, the government said.

Meanwhile Japan's average monthly income per household fell 2.4% in nominal terms in July, while consumption expenditures fell 4.5% nominally and was down 2.0% in inflation-adjusted terms.
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The ministry also said Japan's core consumer price index fell 0.2% in July compared to the prior month. The core CPI result, which excludes volatile fresh-food prices, marked a 2.2% drop from the same month last year, the government said.

The fall represented fifth straight monthly decline and was the biggest drop since comparable data was first available in 1971, the Nikkei business daily reported.

Overall CPI was also down 2.2% on year, and fell 0.3% from June.
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Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

Companies will not hire full-time workers or convert temporary workers to full-time workers, if legislation banning the hiring of temporary workers passes. Such legislation will simply throw temporary workers out of work, decreasing the segment of the population with the ability to consume. Such legislation may also cause manufacturers to look more critically at the value provided by older workers. They may simply lay off more expensive older workers and hire more, less expensive, junior workers to get the same amount of work done. That is, such legislation may only fray the social contract further.
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Bloomberg: Japan May Ban Manufacturers From Hiring Temporary Employees

Japan may ban manufacturers from hiring temporary workers, Health and Labor Minister Akira Nagatsuma said, as Prime Minister Yukio Hatoyama seeks to fulfill a campaign pledge to shift more employment to full time.
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Unemployment rose to a postwar high 5.7 percent in July....

Companies started replacing retirees with temporary workers after deregulation in 2004, creating a two-tiered labor market in which mostly younger workers enjoy less security and fewer benefits. The jobless rate, which unexpectedly fell to 5.1 percent in October, has stayed at 5 percent or more since April.
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Third-quarter profits at manufacturers including auto and electronics makers decreased 69.3 percent from a year earlier while sales fell 21.2 percent, a Finance Ministry survey showed last week.

Younger people aren’t reaping the benefits of the improved labor market. The proportion of college students with job offers tumbled 7.4 percentage points from a year earlier to 62.4 percent, an Education Ministry report showed last month, the steepest drop since the survey started in 1996.
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Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

Bloomberg: Japan Wages Slump at Near-Record Pace of 6.1% as Bonuses Slide
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Monthly wages including overtime and bonuses slipped 6.1 percent from a year earlier to 549,259 yen ($5,056), the Labor Ministry said today in Tokyo. Paychecks slumped an unprecedented 7 percent in June.
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The decline in paychecks was the 19th in a row, extending the longest losing streak since 2003. Today’s report also showed that average monthly wages slid a record 3.9 percent to 315,164 yen last year, the lowest level since the government started tracking the data 1990.

Large businesses cut winter bonuses by 15 percent to 755,628 yen, the steepest drop since the survey began in 1959, a separate report by the Japan Business Federation showed last month. The money is typically paid in December and is often equivalent to several months of pay.
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Pay cuts are also pushing down prices and Japan will probably stay in deflation until the middle of 2012, according to Kyohei Morita, chief economist at Barclays Capital in Tokyo.

Consumer prices excluding fresh food and energy dropped an unprecedented 1.2 percent in December.
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Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

Bloomberg: Japan Jobless Rate Unexpectedly Rises, Prices Drop
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The jobless rate rose to 5.1 percent from 5 percent, the statistics bureau said today in Tokyo. ... Consumer prices excluding fresh food slid 1.5 percent from a year earlier after dropping 1.2 percent in March.
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Household spending dropped 0.7 percent in April from a year earlier, the bureau said. The median estimate of economists surveyed was for a 2.5 percent increase. Retail sales rose 4.9 percent from a year earlier, led by gas stations and auto showrooms.
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A separate report today showed the ratio of jobs to applicants fell to 0.48, meaning there are 48 jobs for every 100 candidates. It was the first deterioration in eight months.
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_________________
Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.

[Suresh]

Bloomberg: Japan Jobless Rate Unexpectedly Rises, Spending Drops
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The jobless rate reached 5.2 percent in May, the third straight monthly increase and the highest level since December, the statistics bureau said in Tokyo. Household spending retreated 0.7 percent from May 2009, the office also said, a day after another report showed retail sales slowed last month. Factory output dropped 0.1 percent from April, the Trade Ministry said, compared with the median forecast in a Bloomberg News survey of 24 economists for a flat reading.
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The economy lost 240,000 workers in May from a month ago, bringing the seasonally adjusted number of those with work to a two-decade low. Sectors including manufacturing, research and education lost jobs, month-on-month breakdowns show.
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The export-led recovery is at least beginning to spur income for workers. Wages increased for a second month in April as employers had staff work more overtime.

A separate report today showed that the ratio of jobs to applicants rose to 0.50 in May, meaning there are 50 positions for every 100 candidates. The measure climbed to its highest level in more than a year.
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_________________
Suresh

Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture.